SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014

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1 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 August

2 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Section I. Important Notice, Contents and Paraphrase Board of Directors, Supervisory Committee, all directors, supervisors and senior executives of SHENZHEN ZHONGHENG HUAFA CO., LTD. (hereinafter referred to as the Company) hereby confirm that there are no any fictitious statements, misleading statements, or important omissions carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. All directors are attended the Board Meeting for report deliberation. The Company has no plans of cash dividend distributed, no bonus shares and has no share converted from capital reserve either. Li Zhongqiu, principal of the Company, Cao Li, person in charger of accounting works and Wu Aijie, person in charge of accounting organ (accounting principal) hereby confirm that the Financial Report of Semi-Annual Report 2014 is authentic, accurate and complete. Concerning the forward-looking statements with future planning involved in the semi-annual report, they do not constitute a substantial commitment for investors. Majority investors are advised to exercise caution of investment risks. 2

3 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Content Semi-Annual Report Section I Important Notice, Contents and Paraphrase... 2 Section II Company Profile... 5 Section III Accounting data and summary of finnaical indexes... 7 Section IV Report of the Board of Directors... 9 Section V Important Events Section VI Changes in shares and particular about shareholders Section VII Preferred Stock Section VIII Directors, Supervisors and Senior Executives Section IX Financial Report Section X Documents Available for Reference

4 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Paraphrase Items Refers to Definition Company, Shen Huafa Hengfa Technology company Huafa Property Company Huafa Lease Company Huafa Trade Co., Ltd. Wuhan Zhongheng Group HK Yutian Company Hengsheng Photoelectricity Company Hengsheng Yutian Company Yutian Henghua Company Huafa Hengtian Company Huafa Hengtai Company Refers to SHENZHEN ZHONGHENG HUAFA CO., LTD. Refers to Wuhan Hengfa Technology Co., Ltd. Refers to Shenzhen Zhongheng Huafa Property Co., Ltd Refers to Shenzhen Huafa Property Lease Management Co., Ltd Refers to Wuhan Zhongheng Huafa Trade Co., Ltd. Refers to Wuhan Zhongheng New Science & Technology Industrial Group Co., Ltd. Refers to Hong Kong Yutian International Investment Co., Ltd. Refers to Wuhan Hengsheng Photoelectricity Industry Co., Ltd. Refers to Wuhan Hengsheng Yutian Industrial Co., Ltd. Refers to Shenzhen Yutian Henghua Co., Ltd. Refers to Shenzhen Huafa Hengtian Co., Ltd. Refers to Shenzhen Huafa Hengtai Co., Ltd. 4

5 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Section II Company profile I. Company Profile Short form for share SHEN HUAFA-A, SHEN HUAFA- B Code for share , Listing stock exchange Shenzhen Stock Exchange Chinese name of the Company 深圳中恒华发股份有限公司 Abbr. of Chinese name of the Company(if applicable) English name of the Company(if applicable) Legal Representative 深华发 SHENZHEN ZHONGHENG HUAFA CO., LTD. Li Zhongqiu II. Contact person and ways Secretary of the Board Rep. of securities affairs Name Weng Xiaojue Niu Yuxiang Contact adds. 6/F, East Tower, Huafa (N) Road, Futian District, Shenzhen 6/F, East Tower, Huafa (N) Road, Futian District, Shenzhen Tel. (0755) (0755) Fax. (0755) (0755) hwafainvestor@126.com.cn hwafainvestor@126.com.cn III. Others 1. Way of contact Whether registrations address, offices address and codes as well as website and of the Company changed in reporting period or not Applicable Not applicable Registrations address, offices address and codes as well as website and of the Company has no change in reporting period, found more details in Annual Report Information disclosure and preparation place Whether information disclosure and preparation place changed in reporting period or not Applicable Not applicable The newspaper appointed for information disclosure, website for semi-annual report publish appointed by CSRC and preparation place for semi-annual report have no change in reporting period, found more details in Annual Report

6 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT Registration changes of the Company Whether registration has changed in reporting period or not Applicable Not applicable Date/place for registration of the Company, registration number for enterprise legal license, number of taxation registration and organization code have no change in reporting period, found more details in Annual Report

7 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Section III. Accounting data and summary of financial indexes I. Main accounting data and financial indexes Whether it has retroactive adjustment or re-statement on previous accounting data for accounting policy changed and accounting error correction or not Yes No Current period Same period of last year Increase/decrease in this report y-o-y Operating revenue (RMB) 366,621, ,732, % Net profit attributable to shareholders of the listed company(rmb) Net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses(rmb) Net cash flow arising from operating activities(rmb) 1,455, ,967, % 1,039, ,817, % -188,587, ,557, % Basic earnings per share (RMB/Share) % Diluted earnings per share (RMB/Share) % Weighted average ROE (%) 0.53% 0.7% 0.17 percentage points down End of current period End of last period Increase/decrease in this report-end over that of last period-end Total assets (RMB) 1,187,640, ,348, % Net assets attributable to shareholder of listed company(rmb) 275,119, ,663, % II. Items and amounts of extraordinary profit (gains)/loss Applicable Not applicable Item Amount Note In RMB Gains/losses from the disposal of non-current asset (including the write-off that accrued for impairment of assets) Other non-operating income and expenditure except for the aforementioned items 64, , Less: Impact on income tax 138,

8 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Total 416, Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss, explain reasons Applicable Not applicable In reporting period, the Company has no particular about items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss 8

9 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Section IV. Report of the Board of Directors I. Introduction For the 1 st half year of 2014, the global economy recovered in growth. Chinese economy stepped to the period of platform transition and area of deep reformation. The downward pressure on economy intensified. Though faced with macro policies of deadline-holding and stability-maintaining, it is still expectable to keep a reasonable growth for the economy. Traditional home-appliance industry is tending to shift to new business model and stepping marketing to intelligent home-appliance. Hence, consumption is upgrading and demand is stable. Correspondingly, our business of processing to affiliated products of home-appliances, obtained slight improvement in stability. Due to reducing price to enhance sales volume as well as cost increment, gross margin of 3 business sections declined at different levels. The overall performance kept a basic level compared with the same period of last year. Leasing own properties maintained a stale operation. For the 1 st half year of 2014, the Company realized operating income of RMB million, up by 21.1% against last year; net profit of RMB 1.46 million, down by 26.02% against last year. Industry production: molding section obtained operating income of RMB million in reporting period, up by 28.32% against last year. Based on important/crucial clients relationship management, they adjusted orders strategy at an appropriate level. Hence they minimized quantity of orders with narrow gross margin and added business with higer gross margin. Also they strenghthed fine and detailed management, strictly control site production. They endured challenge of particularness and repeated check from well-known clients, with quality products, retained the good reputation. Styrofoam section realized oerating income of RMB million in reporting period, up 12.07% against last year. Faced with going-up prices of material and fuels, more cost to huamn resurce, going-down sales price and intensified market competition, the section made use of unique technology and differential competitiveness to resolve problem raised by client. Hence they won a good reputation and the initiative among market competion. The vedio section relaized operatig incoem of RMB million in reporting period, up by 5.34% against last year. Taking priority of fundamental production, the section put more energy to design and development of new products. They took trial on optimizing cost of monitors, sets types adjustment and upgrading structure. Property Lease: the leasing contract for 1 st floor to 3 rd floor of Huafa Building, which is own property of the Company, had been terminated in the 3 rd season of It needs redecoration and merchant. While the railway station of the line 7 nearby Huaqiang North shopping mall is being constructed, the unfavorable environment caused slow tender progress. In reporting period, the Company continued positive negotiation with appropriate merchants. Hence we speeded up the progress and obtained improvement. Now most areas have been leased out. Shops are running business one by one. Though most idle areas have been settled with merchants in, not all the problems have been solved. For 1 st half year of 2014, the property leasing section realized operating income of RMB million, up by 12.30% against last year. 9

10 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 II. Main business analysis Y-o-y changes of main financial data In RMB Current period Same period of last year Y-o-y increase/decrease Reasons for changes Operation revenue 366,621, ,732, % Operation cost 326,921, ,513, % Sales expenses 5,564, ,557, % Administrative expenses 19,519, ,074, % Financial cost 10,209, ,523, % Income tax expense 640, , Reversed previous 73.30% deferred income tax expenses Net cash flow arising from operation activities Net cash flow arising from investment activities Net cash flow arising from financing activities Net increase of cash and cash equivalent -188,587, ,557, Sales return decreased in the Period and money % paid in advance for goods increased Boiler expenses newly -2,820, ,476, % included in the period New bank loans increased due to the 424,887, ,161, % operation development needs New bank loans 233,520, ,635, ,958.31% increased in the period Major changes on profit composition or profit resources in reporting period Applicable Not applicable No major changes on profit composition or profit resources occurred in reporting period The future development and planning extended to reporting period that published in disclosure documents as prospectus, private placing memorandum and recapitalize statement Applicable Not applicable No future development and planning extended to reporting period that published in disclosure documents as prospectus, private placing memorandum and recapitalize statement Review on the previous business plan and its progress during reporting period Null 10

11 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 III. Constitution of main business In RMB Operating revenue Operating cost Gross profit ratio Increase or decrease of operating revenue over same period of last year Increase or decrease of operating cost over same period of last year Increase or decrease of gross profit ratio over same period of last year According to industries 1.92 percentage Monitors 140,670, ,062, % 5.34% 7.45% points up Plastic injection hardware 1.42 percentage 145,506, ,348, % 28.32% 30.37% points up 3.04 percentage Foam pieces 41,549, ,581, % 12.07% 16.08% points up Steel 16,714, ,664, % According to products 1.92 percentage Monitors 140,670, ,062, % 5.34% 7.45% points up Plastic injection hardware 1.42 percentage 145,506, ,348, % 28.32% 30.37% points up 3.04 percentage Foam pieces 41,549, ,581, % 12.07% 16.08% points up Steel 16,714, ,664, % According to region 2.96 percentage Hong Kong 121,292, ,304, % -9.17% -6.37% points up 2.78 percentage Central China 223,148, ,351, % 48.30% 52.99% points up IV. Core competitive-ness analysis 1. All industrial lands of the Company located in Shenzhen were taken into the first batch of plan under 2010 Shenzhen urban upgrade unit planning formulation plan. In future, development and operation of self-owned land resources would become the income source of the Company on a long-term and stable basis and new profit growth point. 2. The Company has three plants in Wuhan economic technology park with an area of nearly 80,000 square meters where various famous enterprises are located in this area. Benefiting from radiation radius requirements for processing matching services, the Company enjoys superior and stable customer resources and has formed a good long-term cooperative relationship; in particular, its injection molding business and polystyrene businesses have been operated for many years with steady management group and abundant production experiences, which makes the Company enjoying high recognition and annual production capacity and scale in the forefront of Central China. 11

12 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 V. Investment analysis 1. Main subsidiaries and joint-stock companies analysis Applicable Not applicable Main subsidiaries and joint-stock companies In RMB Name Type Industry involved Main products or service Registered capital Total assets Net assets Operation revenue Operation profit Net profit R&D, Hengfa Technology company Subsidiary Production sales production, sales of products and import and export 181,643, ,709, ,319, ,391, ,564, ,348, business etc. Sales of Huafa Photoelectricity Trade Co., Subsidiary Sales products, 100, ,324, , ,714, , , Ltd. Imp&Exp business of goods Huafa Property Company Subsidiary Property management Property leasing and management of self-owned property 1,000, , , , , , Huafa Lease Company Subsidiary Property management Property leasing and management of self-owned property 1,000, ,900, ,026, Yutian Henghua Company Subsidiary Property management Property leasing and management of self-owned property 1,000, , , Huafa Hengtian Company Subsidiary Property management Property leasing and management of self-owned property 1,000, , , Huafa Hengtai Company Subsidiary Property management Property leasing and management of self-owned property 1,000, , ,

13 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 VI. Prediction of business performance from January September 2014 Estimation on accumulative net profit from the beginning of the year to the end of next report period to be loss probably or the warning of its material change compared with the corresponding period of the last year and explanation on reason Applicable Not applicable VII. Explanation from the Board and Supervisory Committee for Qualified Opinion from the CPA of this year s Applicable Not applicable VIII. Explanation on Qualified Opinion of previous year from the Board Applicable Not applicable IX. Implementation of profit distribution in reporting period Implementation or adjustment of profit distribution plan in reporting period, cash dividend plan and shares converted from capital reserve in particular Applicable Not applicable Previous year s profit distribution plan was no profit distribution and shares converted from capital reserve either X. Profit distribution and capitalization of capital reserves in the Period Applicable Not applicable The Company has no plans of cash dividend distributed, no bonus shares and has no share converted from capital reserve either for the semi-annual year XI. In the report period, reception of research, communication and interview Applicable Not applicable Time Place Way Type Reception Contents discussed and material provided ~ Headquarter of the Company Telephone communication / inquiry in writing Individuals Individual investor Communicating operation situation of the Company, assets status and process of city update projects 13

14 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Section V. Important Events I. Corporate governance The actual condition of the corporate governance shows no difference with the Company Law and relevant requirement from CSRC. II. Significant related transaction 1. Related transaction related to daily operation Applicable Not applicable Parties of related trade Related relationship Type of related trade Contents of related trade Pricing principle of related trade Amount of Price of related related trade (10 trade thousand Yuan) Ration in amount of similar related trade Accounts-s ettlement of related trade Available market prices of similar transactions Date of disclosure Index of disclosure The average market price refers to the price of same specifications which is Hengsheng Photoelectricity Company Under the control of the same final controlling party Purchase Purchasing LCD monitors Confirmed with 1% of current market average price in principle, and refer to both their bargaining power Telegraphic 2, % transfer searched from through the world famous professional market survey company website recognized authority in the industry and LCD nfo.com.cn/fin alpage/ / PDF professional market survey company website HK Yutian Company Under the control of the same final controlling party Purchase Purchasing LCD overall monitor machine set Synchronized with the market Telegraphic 8, % transfer Same as above HK Yutian Company Under the control of the same final controlling party Sales Sales LCD overall monitor machine set According to the customer sales order price sure Telegraphic 12, % transfer Same as above Hengsheng Photoelectricity Company Under the control of the same final Sales Sales of LCD TVs and Reference to the market price Telegraphic % transfer

15 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 controlling party computers Total , Details of returned large sales N/A In the reporting period, Hengfa Technology Company purchased LCD from Hengsheng Photoelectricity Predict on total amount of daily related trade Company with RMB 22,720,000 approximately, 31.04% of the annual amount predicted at the beginning on the way in this period according to of the year; purchased LCD from HK Yutian Company with RMB 84,190,000, approximately, 27.61% of classification, as well as actual the annual amount predicted at the beginning of the year; sold LCD whole machine to HK Yutian implementation in reporting period (if Company with RMB 121,290,000 approximately, 36.16% of the annual amount predicted at the applicable) beginning of the year. 2. Related transaction incurred by purchase or sales of assets Applicable Not applicable No related transaction incurred by purchase or sales of assets in Period 3. Related transaction from jointly investment outside Applicable Not applicable No related transaction from jointly investment outside occurred in Period 4. Credits and liability of related party Applicable Not applicable Whether have non-operation related liabilities and credits relations or not Yes No The Company had no non-operation related liabilities or credits relations 5. Other significant related transactions Applicable Not applicable The Company had no other significant related transactions in the reporting period III. Significant contracts and its implementation 1. Guarantees Applicable Not applicable In 10 thousand Yuan Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries) Name of the Company guaranteed Related Announcement disclosure date Guarantee limit Actual date of happening (Date of signing agreement) Actual guarantee limit Guarantee type Guarantee term Complete implementati on or not Guarantee for related party Guarantee of the Company for the subsidiaries Name of the Company guaranteed Related Announcement disclosure date Guarantee limit Actual date of happening (Date of signing agreement) Actual guarantee limit Guarantee type Guarantee term Complete Guarantee for implementatio related party n or not Hengfa Technology Company Joint liability ,000 10,537 guarantee 1 year No No Total amount of approving guarantee for 50,000 Total amount of actual occurred guarantee 12,800 15

16 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 subsidiaries in report period (B1) for subsidiaries in report period (B2) Total amount of approved guarantee for subsidiaries at the end of reporting period (B3) Total balance of actual guarantee for 50,000 subsidiaries at the end of reporting period (B4) 10,537 Total amount of guarantee of the Company( total of two abovementioned guarantee) Total amount of approving guarantee in report period (A1+B1) Total amount of actual occurred guarantee 50,000 in report period (A2+B2) 12,800 Total amount of approved guarantee at the end of report period (A3+B3) Total balance of actual guarantee at the 50,000 end of report period (A4+B4) 10,537 The proportion of the total amount of actually guarantee in the net assets of the Company (that is A4+ B4) 38.30% Including: Amount of guarantee for shareholders, actual controller and its related parties(c) 0 The debts guarantee amount provided for the guaranteed parties whose assets-liability ratio exceed 70% directly or indirectly(d) 0 Proportion of total amount of guarantee in net assets of the Company exceed 50%(E) 0 Total amount of the aforesaid three guarantees(c+d+e) 0 Explanations on possibly bearing joint and several liquidating responsibilities for undue guarantees (if applicable) N/A Explanations on external guarantee against regulated procedures (if applicable) N/A Explanation on details of guarantee by complex method Nil (1) Guarantee outside against the regulation Applicable Not applicable No guarantee outside against the regulation in Period 2. Other material contracts Applicable Not applicable The Company had no other material contracts in the reporting period. 3. Other material transactions Applicable Not applicable The Company had no other material transactions in the reporting period. IX. Commitments made by the Company or shareholders holding above 5% shares of the Company in reporting period or occurred in the previous reporting period but continued to reporting period Applicable Not applicable 16

17 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Commitments Commitment party Contents Dated for commitment Commitment term Implementation Share Merger Reform N/A N/A Within 1 year after transferred of this equity acquisition: 1. Injected relevant Commitments in report of equity change Wuhan acquisition or Zhongheng Group capital of plastic injection business into the Company; 12 April 2007 to 11 April 2008; 13 May 2014 to 12 May 2015 Implementing 2.70% equity of the Hengsheng Photoelectricity will inject into the Company. Commitments in assets reorganization N/A N/A Commitments in initial public offering or refinancing Other commitments to minority shareholders of the Company Completed on time or not N/A N/A No N/A N/A 1. On 5 June 2008, approving by the 3 rd Extraordinary Meeting of Board of Directors 2008, the Company purchased relevant assets of plastic injection products from Wuhan Zhongheng Group by cash of RMB 27 million, the commitment have been implemented; 2. In the first 10 days of May, 2008, the Company officially started off the significant asset restructures work of purchasing the 70% equities of Hengsheng Photoelectricity.; engaged financial consultant and law consultant to carry out earnest investigation on the restructure assets that may be involved, and negotiated with relevant departments Detail reasons for un-complement and which were in charge of this. However, due to that relevant condition was not mature; further plan (if applicable) there still remain obstacles in material asset restructure. In April 2014, considering unpleasant operation of Hengsheng Photoelectricity, as well avoid causing loss to listed companies due to forced commitment fulfillment, holding shareholder Wuhan Zhongheng Group raised proposal of changing the commitment from perspective of maintaining long-term interests of listed company, which was changed to: within 1 year since the General Shareholders Meeting approved, Wuhan Zhongheng Group sold its underneath street shops located in property of the 1 st phase of Yutian Happy Sea in cash. The revised commitment has been approved in Shareholders General Meeting of 2013 held on 13 th May

18 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 V. Engagement and non-reappointment of CPA Whether the semi-annual report was audited or not Yes No VI. Penalty and rectification Applicable Not applicable The Company had no penalty or rectification in the reporting period. VII. Risk disclosure of delisting with laws and rules violated Applicable Not applicable The Company has no delisting risks with laws and rules violated in Period VIII. Explanation on other significant events (I)The Company signed Asset Exchange Contract with Wuhan Zhongheng Group on 29 April 2009 (details were referred to in the announcement dated 30 April 2009), and the contract was executed well (details were set out in the 2010 annual report). Pursuant to the contract, since part of the assets of the Company (namely two parcel of industrial lands located at Huafa road, Gongming town, Guangming new district, Shenzhen (the property certificate No. were SFDZ No and SFDZ No , No. of parcels were A and A , and the aggregate area was 48,200 sq.m)) were the lands listed in the first batch of plan for 2010 Shenzhen urbanization unit planning preparation plan. For promotion of such urbanization project and joint cooperation, the Company has not completed the transfer procedures in respect of the aforesaid land. (II) Controlling shareholder of the Company Wuhan Zhongheng Group, derived established the Wuhan Zhongheng New Technology Industrial Group Co., Ltd. and Wuhan Zhongheng Huaxin Industrial Co., Ltd. in September 2013 for further resource integration and industry layout adjustment: Wuhan Zhongheng New Technology Industrial Group Co., Ltd. is the surviving corporation after derived, maintains original name of Wuhan Zhongheng Group and owns assets and equity with the real estate concerned under the name of former Wuhan Zhongheng Group; Wuhan Zhongheng Huaxin Industrial Co., Ltd. (Huaxin Industrial) is a newly company derived, owes assets and equity without real estate concerned under the name of former Wuhan Zhongheng Group. After splitting, the two enterprises have the same shareholder structures as 99 percent equity held by Mr. Li Zhongqiu and 1 percent equity owned by Wuhan Henghui Investment Consulting Co., Ltd. After completion of splitting, Huaxin Industrial inherit percent equity of the Company that held by former Wuhan Zhongheng Group, and the Reply on Approval of Wuhan Zhongheng Huaxin Industrial Co., Ltd. Notified the Purchase Report and Exempted the Mandatory Tender Offer to Shenzhen Zhongheng Huafa Co., Ltd. issued by CSRC (Zheng Jian Xu Ke [2013] No.1503) was received dated 27 November Up to end of the Period, ownership transfer procedures for the aforesaid shares are not completed. Wuhan Zhongheng Group no longer owns shares of the Company after ownership of stock transfer, controlling shareholder of the Company change to Huaxin Industrial with actual controller stay the same as well as total share capital of the Company; the controlling shareholder splitting has no substantive impact on the Company. 18

19 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Section VI. Changes in Shares and Particulars about Shareholders I. Number of shares and shares held In Share Total common shareholders at period-end Total preference shareholders with voting rights recovered at 24,909 end of reporting period (if applicable) (see Note 8) Particulars about shares held above 5% by shareholders or top ten shareholders 0 Shareholders Nature of shareholder Proportion of shares held Number of shares held at period-end Changes in reporting period Amount of Amount of the restricted the restricted shares held shares held Number of share pledged/frozen State of share Amount Wuhan Group Domestic Zhongheng non-state-owned legal person Pledged 116,489, % 116,489,894 N/A 116,489,894 0 Frozen 0 SEG (HONG KONG) Overseas CO., LTD. person legal 5.85% 16,569,560 N/A 0 16,569,560 Pledged/fro zen 0 GOOD HOPE CORNER INVESTMENTS LTD. Overseas person legal Pledged/fro 4.91% 13,900,000 N/A 0 13,900,000 zen 0 BINGHUA LIU Domestic nature person 0.31% 876, ,213 Pledged/fro zen 0 Xie Deqing Domestic nature person 0.28% 780, ,100 Pledged/fro zen 0 Shi Feng Domestic nature person 0.25% 714, ,273 Pledged/fro zen 0 Wang Jianguang Domestic nature person 0.23% 651, ,849 Pledged/fro zen 0 Li Jianfeng Domestic nature person 0.23% 637, ,600 Pledged/fro zen 0 Zhu Ming Domestic nature person 0.22% 611, ,348 Pledged/fro zen 0 Jia Wenjun Domestic nature person 0.20% 557, ,232 Pledged/fro zen 0 Strategy investors or general corporate becomes top 10 shareholders due to rights N/A 19

20 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 issued (if applicable) Explanation on associated relationship among the aforesaid shareholders Among the top ten shareholders, Wuhan Zhongheng New Science & Technology Industrial Group Co., Ltd. neither bears associated relationship with other shareholders, nor belongs to the consistent actor that are prescribed in Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed Companies. The Company neither knew whether there exists associated relationship among the other tradable shareholders, nor they belong to consistent actors that are prescribed in Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed Companies. Particular about top ten shareholders with un-restrict shares held Shareholders name Amount of listed shares held at period-end Type Type of shares Amount SEG (HONG KONG) CO., LTD. GOOD HOPE CORNER INVESTMENTS LTD BINGHUA LIU Xie Deqing Domestically listed 16,569,560 foreign shares Domestically listed 13,900,000 foreign shares Domestically listed 876,213 foreign shares Domestically listed 780,100 foreign shares 16,569,560 13,900, , ,100 Shi Feng 714,273 RMB common share 714,273 Wang Jianguang Li Jianfeng Zhu Ming 651,849 Domestically listed foreign shares Domestically listed 637,600 foreign shares 611,348 Domestically listed foreign shares 651, , ,348 Jia Wenjun 557,232 RMB common share 557,232 Wu Jingmin 491,786 RMB common share 491,786 Expiation on associated relationship or consistent actors within the top 10 un-restrict shareholders and between top 10 un-restrict shareholders and top 10 shareholders Explanation on shareholders involving margin business (if applicable)(see note 4) Among the top ten unrestricted shareholders, the Company neither knew whether there exists associated relationship among the other tradable shareholders, nor they belong to consistent actors that are prescribed in Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed Companies. Among the top ten shareholders, Wuhan Zhongheng Group neither bears associated relationship with other shareholders, nor belongs to the consistent actor that are prescribed in Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed Companies. Ended as the reporting period, in top ten shareholders, 714,273 shares of the Company were hold by Shifeng through the guarantee securities account of client credit trading under the name of China Merchants Securities Co., Ltd., representing 100 percent of the Company s stock held by himself 20

21 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Whether has a buy-back agreement dealing in reporting period Yes No The shareholders o f the Company had no buy-back agreement dealing in reporting period. II. Changes of controlling shareholders or actual controller Changes of controlling shareholders in reporting period Applicable Not applicable Changes of controlling shareholders had no change in reporting period. Changes of actual controller in reporting period Applicable Not applicable Changes of actual controller in reporting period had no change in reporting period. III. Share holding increasing plan proposed or implemented in reporting period from shareholder of the Company and its concerted action person Applicable Not applicable As far as the Company know, there are no share holding increasing plan proposed or implemented in Period from shareholder of the Company and its concerted action person 21

22 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Section VII. Preferred Stock I. Issuance and listing of preferred stock in Period Applicable Not applicable II. Number of shareholders with preferred stock held and shareholdings Applicable Not applicable III. Repurchase and conversion of preferred stock 1. Preferred stock repurchased Applicable Not applicable 2. Preferred stock converted Applicable Not applicable IV. Preferred stock with voting rights recovered and executed Applicable Not applicable V. Accounting policy taken for preferred stock and reasons Applicable Not applicable 22

23 SHENZHEN ZHONGHENG HUAFA CO., LTD. SEMI-ANNUAL REPORT 2014 Section VIII. Directors, Supervisors and Senior Executives I. Changes of shares held by directors, supervisors and senior executives Applicable Not applicable Shares held by directors, supervisors and senior executives have no changes in reporting period, found more details in Annual Report II. Resignation and dismissal of directors, supervisors and senior executives Applicable Not applicable Name Title Type Date Reason Li Dingan Independent director End-of-term leave Term of office is about to expire for 6 years, apply to resigned independent director Zhang Yi Independent director End-of-term leave Term of office is about to expire for 6 years, apply to resigned independent director Zhang Zhaoguo Qiu Daliang Independent director Independent director Be elected Be elected as independent director of the Company Be elected Be elected as independent director of the Company 23

24 Section IX. Financial Report I. Audit reports Whether the semi-annual report was audited or not Yes No The financial report of this semi-annual report was unaudited II. Financial statements Units in Notes of Financial Statements is RMB 1. Consolidated balance sheet Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD Item Closing balance Opening balance In RMB Current assets: Monetary funds 288,085, ,251, Settlement funds Lending funds Tradable financial assets Notes receivable 62,149, ,375, Accounts receivable 370,534, ,278, Prepayments 134,263, ,483, Premium receivable Reinsurance accounts receivable Reinsurance contract reserve receivable Interest receivable Dividend receivable Other account receivable 8,151, ,623, Buying back the sale of financial assets Inventory 39,569, ,119, Non-current assets due within one year Other current assets Total current assets 902,754, ,132,

25 Non-current assets: Issuance of loans and advances Financial assets available for Sale Held-to-maturity investment Long-term receivables Long term equity investment Investment real estate 31,902, ,529, Fixed asset 190,900, ,542, Project in progress 4,090, ,323, Project materials Liquidation of fixed asset Productive biological asset Oil and gas asset Intangible asset 48,613, ,360, Development expenditure Goodwill Long-term deferred expenditure 1,188, ,773, Deferred income tax asset 8,191, ,686, Other non-current asset Total non-current asset 284,886, ,216, Total Assets 1,187,640, ,348, Current Liabilities: Short-term borrowing 170,394, ,140, Borrowing from the central bank Deposits and interbank deposit Borrowed capital Transaction financial liabilities Notes payable 42,926, ,646, Accounts payable 47,209, ,206, Account received in advance 1,651, ,572, Financial assets sold for repurchase Fees and commissions payable Salary payable 3,829, ,760, Taxes payable 14,932, ,943,

26 Interest payable Dividend payable Other payables 28,971, ,392, Reinsurance payables Reserves for insurance contracts Agency securities trading Agency securities underwriting Non-current liabilities due within one year Other current liabilities Total current liabilities 309,916, ,661, Non-current liabilities Long-term loans 600,000, ,418, Bonds payable Long-term payables Special payables Accrued liabilities 2,604, ,604, Deferred income tax liability Other non-current liability Total non-current liability 602,604, ,023, Total liability 912,520, ,684, Owners equity (or Shareholder s equity): Paid-in capital(share capital) 283,161, ,161, Capital surplus 109,496, ,496, Less: treasury stock Special reserve Surplus reserve 77,391, ,391, Reserve for general risks Retained profit -194,930, ,386, Converted difference in foreign currency Statements Total owner s equity attributable to parent company 275,119, ,663, Interest of minority shareholders Total owners equity (or shareholders equity) 275,119, ,663, Total liabilities and owners equity (or shareholders equity) 1,187,640, ,348, Legal Representative: Li Zhongqiu Person in Charge of Accounting: Cao Li Person in Charge of Accounting Department: Wu Aijie 26

27 2. Balance Sheet of Parent Company Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD In RMB Item Closing balance Opening balance Current assets: Monetary fund 223,238, ,575, Tradable financial assets Notes receivable Accounts receivable 1,699, ,718, Prepayments 500, ,004, Interest receivable Dividend receivable Other account receivable 378,317, ,394, Inventory 14, , Non-current assets due within one year Other current assets Total current assets 603,770, ,708, Non-current assets: Financial assets available for Sale Held-to-maturity investment Long-term receivables Long term equity investment 187,708, ,708, Investment real estate 31,902, ,529, Fixed assets 102,295, ,096, Project in progress 2,693, ,323, Project materials Liquidation of fixed assets Productive biological asset Oil and gas asset Intangible assets 5,350, ,423, Development expenditure Goodwill Long-term deferred expenditure 1,123, ,698, Deferred income tax asset 8,527, ,485,

28 Other non-current assets Total non-current assets 339,601, ,265, Total assets 943,372, ,974, Current liabilities: Short-term borrowing 37,708, ,180, Transaction financial liabilities Notes payable Accounts payable 9,740, ,745, Account received in advance 1,050, , Salary payable 655, , Taxes payable 10,600, ,616, Interest payable Dividend payable Others payables 17,123, ,799, Non-current liabilities due within one year Other current liabilities Total current liabilities 76,878, ,123, Non- current liabilities: Long-term loans 600,000, ,418, Bonds payable Long-term payables Special payables Accrued liabilities 2,604, ,604, Deferred income tax liability Other non-current liability Total non-current liability 602,604, ,023, Total liabilities 679,482, ,146, Owners equity (or Shareholder s equity): Paid-in capital(share capital) 283,161, ,161, Capital surplus 109,496, ,496, Less: treasury stock Special reserve Surplus reserve 77,391, ,391, Reserve for general risks 28

29 Retained profit -206,160, ,221, Converted difference in foreign currency Total owners equity (or shareholders equity) 263,889, ,828, Total liabilities and owners equity (or shareholders equity) 943,372, ,974, Legal Representative: Li Zhongqiu Person in Charge of Accounting: Cao Li Person in Charge of Accounting Department: Wu Aijie 3. Consolidated Income Statements Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD In RMB Item Current Amount Amount of the Previous Period I. Total operation revenue 366,621, ,732, Including: Operating revenue 366,621, ,732, Interest income Earned premium Fee and commission income II Total Operating cost 365,080, ,072, Including: Operating costs 326,921, ,513, Interest costs Fee and commission costs Cash surrender Net compensation expenses Net extraction reserves for insurance contracts Policy dividend payout Reinsurance expense Business tax and surcharge 3,005, ,273, Sales expenses 5,564, ,557, Administrative expenses 19,519, ,074, Financial expenses 10,209, ,523, Asset impairment losses -140, , Add: gains from changes of fair value (Loss is listed with - ) Investment gain (Loss is listed with - ) Including: Investment gains on affiliated Company and joint venture Exchange gains (Loss is listed with - ) III. Operating profits (Loss is listed with - ) 1,541, ,659,

30 Add: Non-operating income 652, , Less: Non-operating expenditure 97, ,040, Including: Disposal loss on non-current liability 97, , IV Total profits (Total loss is listed with - ) 2,096, ,337, Less: Income tax expenses 640, , V. Net profit (Net loss is listed with - ) 1,455, ,967, Including: Net profit generated by combined party before merged Net profit attribute to owners of parent company 1,455, ,967, Minority interest VI. Earnings per share(eps) (i) Basic Earnings per share(eps) (ii) Diluted Earnings per share(eps) VII. Other consolidated income VIII. Total consolidated income 1,455, ,967, Total consolidated income attributable to owners of parent company 1,455, ,967, Total consolidated income attributable to minority shareholders Legal Representative: Li Zhongqiu Person in Charge of Accounting: Cao Li Person in Charge of Accounting Department: Wu Aijie 4. Profit Statement of parent company Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD In RMB Items Current Amount Amount of the Previous Period I. Operation revenue 19,690, ,088, Less: Operating costs 3,355, ,725, Business tax and surcharge 1,326, ,239, Sales expenses 139, Administrative expenses 10,625, ,055, Financial expenses 5,283, ,782, Asset impairment losses 168, , Add: gains from changes of fair value(loss is listed with - ) Investment gain(loss is listed with - ) Including: Investment gains on affiliated Company and joint venture III. Operating profits (Loss is listed with - ) -1,069, ,014, Add: Non-operating income 88, , Less: Non-operating expenditure 1,889,

31 Including: Disposal loss on non-current liability III. Total profit (Loss is listed with - ) -980, , Less: Income tax expenses -42, , IV. Net profit (net loss is listed with - ) -938, , V. Earnings per share(eps): (i) Basic Earnings per share(eps) (ii) Diluted Earnings per share(eps) VI. Other consolidated income VII. Total consolidated income -938, , Legal Representative: Li Zhongqiu Person in Charge of Accounting: Cao Li Person in Charge of Accounting Department: Wu Aijie 5. Consolidated Cash Flow Statement Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD I. Cash flows arising from operating activities: In RMB Items Current Amount Amount of the Previous Period Cash received from selling commodities and providing labor services 197,910, ,036, Net increase of customer deposit and interbank deposit Net increase of loan from central bank Net increase of capital borrowed from other financial institution Cash received from original insurance contract fee Net cash received from reinsurance business Net increase of insured savings and investment Net increase of disposal of transaction financial asset Cash received from interest, commission charge and commission Net increase of capital borrowed Net increase of returned business capital Write-back of tax received 3, Other cash received concerning operating activities 12,763, ,881, Subtotal of cash inflow arising from operating activities 210,673, ,921, Cash paid for purchasing commodities and receiving labor service 351,029, ,478, Net increase of customer loans and advances Net increase of deposits in central bank and interbank Cash paid for original insurance contract compensation Cash paid for interest, commission charge and commission 31

32 Cash paid for bonus of guarantee slip Cash paid to/for staff and workers 29,924, ,565, Taxes paid 5,286, ,855, Other cash paid concerning operating activities 13,020, ,580, Subtotal of cash outflow arising from operating activities 399,261, ,479, Net cash flows arising from operating activities -188,587, ,557, II. Cash flows arising from investing activities: Cash received from recovering investment Cash received from investment income Net cash received from disposal of fixed, intangible and other long-term assets 50, Net cash received from disposal of subsidiaries and other units Other cash received concerning investing activities Subtotal of cash inflow from investing activities 50, Cash paid for purchasing fixed, intangible and other long-term assets 2,870, ,476, Cash paid for investment Net increase of mortgaged loans Net cash paid for obtaining subsidiaries and other units Other cash paid concerning investing activities Subtotal of cash outflow from investing activities 2,870, ,476, Net cash flows arising from investing activities -2,820, ,476, III. Cash flows arising from financing activities Cash received from absorbing investment Including: Cash received from absorbing minority shareholders investment by subsidiaries Cash received from loans 799,000, ,842, Cash received from issuing bonds Other cash received concerning financing activities Subtotal of cash inflow from financing activities 799,000, ,842, Cash paid for settling debts 364,293, ,810, Cash paid for dividend and profit distributing or interest paying 9,819, ,870, Including: Dividend and profit of minority shareholder paid by subsidiaries Other cash paid concerning financing activities Subtotal of cash outflow from financing activities 374,113, ,681, Net cash flows arising from financing activities 424,887, ,161,

33 IV. Influence on cash and cash equivalents due to fluctuation in exchange rate 41, ,490, V. Net increase of cash and cash equivalents 233,520, ,635, Add: Balance of cash and cash equivalents at the period -begin 50,704, ,834, VI. Balance of cash and cash equivalents at the period -end 284,224, ,470, Legal Representative: Li Zhongqiu Person in Charge of Accounting: Cao Li Person in Charge of Accounting Department: Wu Aijie 6. Cash Flow Statement of parent company Prepared by SHENZHEN ZHONGHENG HUAFA CO., LTD In RMB Item Current Amount Amount of the Previous Period I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor services 18,611, ,811, Write-back of tax received Other cash received concerning operating activities 50,396, ,384, Subtotal of cash inflow arising from operating activities 69,007, ,196, Cash paid for purchasing commodities and receiving labor service 1,177, Cash paid to/for staff and workers 2,542, ,740, Taxes paid 2,250, ,011, Other cash paid concerning operating activities 289,661, ,744, Subtotal of cash outflow arising from operating activities 294,454, ,674, Net cash flows arising from operating activities -225,446, ,478, II. Cash flows arising from investing activities: Cash received from recovering investment Cash received from investment income Net cash received from disposal of fixed, intangible and other long-term assets Net cash received from disposal of subsidiaries and other units Other cash received concerning investing activities Subtotal of cash inflow from investing activities Cash paid for purchasing fixed, intangible and other long-term assets 882, , Cash paid for investment 1,000, Net cash paid for obtaining subsidiaries and other units Other cash paid concerning investing activities Subtotal of cash outflow from investing activities 1,882, , Net cash flows arising from investing activities -1,882, , III. Cash flows arising from financing activities 33